Allegion (ALLE) Q2 Earnings & Sales Beat, Margins Strong

Allegion plc’s (NYSE:ALLE) second-quarter 2016 adjusted earnings came in at 99 cents per share, surpassing the Zacks Consensus Estimate of 89 cents by 11.2%. Moreover, earnings surged 39.4% year over year backed by higher margins and revenues.

Quarterly net revenue of $584.9 million beat the consensus mark of $572 million by 2.3%. In addition, the figure increased 12.6% year over year including the impact of currency. The impact of currency headwinds and divestitures was more than offset by benefits from acquisitions and organic growth. All the regions reported strong profits driven by a stable market, investment in new products and channel strategies. Organic revenues increased 8.9% year over year.

Revenues at the Americas segment rose 8.6% year over year. Organic revenues increased 9.8%. Strong segment revenues were driven by growth in residential and non-residential markets and an expected shift in revenues from the first to the second quarter owing to ERP implementation.

EMEIA (Europe, Middle East, India and Africa) segment was up 44.9%, owing to acquisitions, pricing, slightly improving markets and favorable foreign currency. Organic revenues increased 3%.

Revenues at the Asia-Pacific segment were down 20% year over year. Organically, revenues were up 12.9%. Excluding the divesture of the system integration business from prior year results, organic growth was 23.6%. Revenues were driven by strong performance in Australia and New Zealand, multi-family and hospitality verticals, Chinese residential and transportation verticals.

Margins

Adjusted operating margin was 21.5%, up 200 basis points (bps) year over year, thanks to favorable pricing, material deflation, product mix, volume leverage and productivity. The positives more than offset higher investments and inflation.

Acquisitions

On Jun 30, 2016, the company completed the acquisition of Germany-based safety and security provider, Trelock GmbH.

2016 Guidance

Allegion updated its fiscal 2016 guidance. The company expects adjusted earnings per share in the range of $3.30 to $3.40, tighter than prior expectation of $3.25 to $3.40. Allegion expects revenues to increase 8% to 9%, higher than the prior expectation of 7% to 8%. Full-year organic revenues (excluding currency and acquisitions) are likely to increase 5% to 6%, up from the prior expectation of 4% to 5%.

The company currently carries a Zacks Rank #2 (Buy).

Key Picks from the Sector

Some other stocks worth considering in the industrial sector include ASSA ABLOY AB (OTC:ASAZY) , Tyco International plc (NYSE:TYC) and Worthington Industries, Inc. (NYSE:WOR) . All the three companies carry a Zacks Rank #2.

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